Client Update – Warn Act Implications for Covid – 19 Related Layoffs.

With the rapid pace within which the COVID-19 situation unfolded during the prior 6 weeks, employers were caught off guard and not afforded the luxury of careful planning typically associated with layoffs. Now that things have begun to normalize, employers should take care to evaluate which actions may have triggered obligations under the Federal Worker Adjustment and Retraining Notification (“WARN”) act.

This is particularly important for employers who recently implemented temporary layoffs and are now considering layoff extensions, reductions in hours of employees, or further staff cuts.

WARN Act Notice Requirements Generally

Covered employers (those having more than 100 or more full-time workers) must provide advanced (60 days) written notice of certain plant closings or mass layoffs to affected employees, their representatives, and certain government employees.

Any notice must contain: (1) a statement as to whether the layoffs are expected to be permanent or temporary; (2) the date the layoffs are expected to take place; (3) whether or not bumping rights exist; (4) contact information for the company representative from whom additional information can be obtained; and (5) if applicable, an explanation as to why the 60-day notice was not possible.

Actions Triggering WARN Act Notice Requirements

• Permanently or temporarily closing a facility or discontinuing an operating unit affecting at least 50 full time employees;
• Closing an operating unit that has fewer than 50 full time workers, but the closing involves the layoff of enough other workers to make the total number of layoffs 50 or more;
• Laying off 500 or more full time workers at a single site of employment during a 30-day period;
• Laying off 50-499 full time employees at a single company location and the layoffs constitute 33% of the employer’s total active full time workforce; or
• Reducing the hours of work for 50 or more workers by 50% or more for each month in any 6-month period.

Exceptions to the Notice Requirement

There are exceptions to the 60-day Notice Requirement when: (1) a business is defined as a Faltering Company; (2) plant closings or mass layoffs are caused by a Natural Disaster (as defined under the WARN Act), or (3) loss of jobs is caused by some sudden, dramatic, and unexpected action or conditions outside the employer’s control, like the unexpected cancellation of a major order. More simply referred to as Unforeseeable Business Circumstances.

Even if an employer’s situation falls into an exception, notice must be given as soon as practicable. Employers who cannot comply with the 60-day notice must include an explanation as to why advanced notice was not possible.

Application of Exceptions to COVID-19

There has been much talk and debate about the applicability of particular exceptions to the Notice Requirements due to COVID-19 pandemic effects on business operations.

• Faltering Company – this exception may become increasingly relevant as a result of COVID-19’s effect on the global market. If a company is actively seeking capital or business to avoid or postpone a shutdown for a reasonable period and the company reasonably in good faith believes that advance notice would preclude its ability to so obtain such capital or business, the Faltering Company exception would apply.
• Unforeseeable Business Circumstances – So long as the circumstance resulting in layoffs is caused by some sudden, dramatic, and unexpected action or condition outside the employer’s control, an employer may avoid WARN Act notice liability. Yet, COVID-19 qualifying as an “unforeseeable business circumstance” will be evaluated on a case by case basis as compared to the actions of other employers in its own market. No employer will be held to the standard of hindsight when evaluating whether a business circumstance is unforeseeable.
• Natural Disaster – As of date, no case law addresses whether a pandemic such as COVID-19 would qualify as a “natural disaster” triggering an exception to the WARN Act Notice Requirement. While there has been public comment about its application, it remains to be seen if, and under what circumstances, COVID-19 will be considered a “natural disaster” as defined under and for purposes of the WARN Act.

Notice Implications for Temporary Layoffs

Layoffs expected to be less than a 6-month duration do not trigger the WARN Act Notice Requirement. If, however, it is later determined that layoffs will extend beyond 6-months for reasons not reasonably foreseeable at the time the initial layoff was announced, employers must provide the WARN Act notice once it realizes the layoffs will extend beyond 6 months.

Notice Implications for Multiple Rounds of Layoffs

If a series of layoffs occurs during a 90-day period which in the aggregate would trigger the WARN Act, Notice Requirements, notice is required even if none of the layoffs separately would have triggered the Notice Requirements.

State Specific WARN Act Notices

In addition to the federal WARN Act, many states have “mini-WARN” laws. It is important to note that an employer complying with the WARN Act may be in violation of their applicable state’s mini-WARN Act law. Therefore, your state law must be consulted as there are varying thresholds and notice periods that would apply.

The following states have mini-WARN Acts as of date:

• California
• Connecticut
• Delaware
• Georgia
• Hawaii
• Illinois
• Iowa
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• New Hampshire
• New Jersey
• New York
• North Dakota
• Ohio
• Tennessee
• Vermont
• Wisconsin

Areas without mini-WARN Act laws may also have laws triggered by layoffs, reductions in force, or furloughs. For example: (i) D.C. has laws to protect workers when there has been a change in a service contract; (ii) Kansas employers must apply to the Secretary of Labor for authority to cease or limit operations; (iii) Louisiana has laws governing wage payments for terminated employees; (iv) Oregon requires that employers notify the state Department of Community Colleges and Workforce Development if giving notice under the federal WARN Act; and (v) Puerto Rico employers must comply with that territory’s Unjust Dismissal Act.

To complicate matters further, cities, towns, and counties may also have their own rules and ordinances. For example, Philadelphia has ordinances requiring notifications for group layoffs.

Consequences for Violating WARN Act Requirements

Employers that violate the WARN Act face substantial penalties including back pay and benefits to employees for the duration of any violation (up to 60-days) and civil penalties to local government authorities not to exceed $500 for each day of violation.

Takeaways

The rapidly changing landscape caused by the COVID-19 pandemic likely provided employers with an exception to the otherwise applicable 60-day WARN ACT Notice Requirement. However, with increasing uncertainty regarding length of “stay at home orders”, the economic climate, and need for additional rounds of layoffs, employers should consider whether and how notice should be given to limit exposure to a multitude of penalties it could face under federal, state and local law.

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This alert should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This alert is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. We are working diligently to remain well informed and up to date on information and advisements as they become available. As such, please reach out to us if you need help addressing any of the issues discussed in this alert, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.